In particular, an Airbnb investment property could be the perfect asset in your investment portfolio. Airbnb is one of the largest hospitality brands in the world, with over 7 million active listings available in 220 countries. Property owners can take advantage of this service to generate consistent income from their Airbnb investments.
Airbnb is a property rental company. People who are looking for places to stay outside of hotels when they travel can connect with Airbnb hosts who own properties that are available to rent. If you own an Airbnb investment property, Airbnb’s platform makes it easier to find short-term visitors who are traveling in the area.
An Airbnb investment is fairly simple. As an investor, you own a property or unit that you renovate, clean, and prepare for guests. You then apply to become an Airbnb host and must follow all the company regulations.
In return, the platform will list your property for travelers to find. These short-term guests pay a nightly rate to reside in your unit. Airbnb will take a small percentage of your booking revenue, and the rest will go to you.
An Airbnb investment might sound like one of the most profitable strategies to increase your income, but it is not for everyone. It is certainly not a form of passive income unless you hire multiple contractors or a property management company to handle some of the logistics. Here are a few of the pros and cons of owning an Airbnb property.
Pros:
Cons:
An Airbnb property is very different from a conventional investment rental property. The path you choose should be based on your objectives for this investment.
For example, an Airbnb property usually houses short-term guests. Your tenants could be people going on vacation, business travelers, or parents of a college student who is graduating from a nearby university. A conventional rental property, on the other hand, usually secures tenants for longer periods, such as six months, a year, or more.
Another difference is the amount of money you can make. Conventional rental properties typically have rates that are comparable to mortgages in the area. Since an Airbnb property has much shorter booking periods, you can charge a higher nightly rate.
Vacation rental properties can be incredibly lucrative for investors who know what they are doing. With Airbnb services on your side, marketing becomes much easier, and there is a set structure for managing your property. If you are interested in getting started with these vacation rentals, there are some steps you must follow.
Location is everything for Airbnb real estate investing. If you find a property in a difficult real estate market, it may be hard to find tenants for your unit, which will result in low-income opportunities. When searching for a desirable location, try to consider many factors.
Is it a state that is a popular tourist destination? Are there nearby community amenities in the city that guests will enjoy? Is the neighborhood filled with high-value properties? The most successful Airbnb properties are found in desirable locations.
If you want to run a profitable Airbnb business, some locations are better than others. The US has many markets where Airbnb investors can generate a lot of passive income based on the rates in the area and the popularity of the destination. The top five Airbnb locations for investors, according to projections, are:
Other popular and profitable locations include Maui, HI; Crystal River, FL; Joshua Tree, CA; and Key West, FL.
Now you need to figure out what kind of investment property you will offer to guests. There are four main categories of Airbnb properties to choose from: entire places, private rooms, hotel rooms, and shared rooms.
Airbnb rentals are diverse in contrast to most offerings that hotels have. You could invest in an entire property to offer your guests or even a separate living space in your home. Making your investment property family-friendly is a great strategy for attracting the right kinds of guests.
Similar to choosing the right location, analyzing the target market is critical for Airbnb investing. During this stage, a real estate agent can be your best friend. They can help you understand the local market and what prices are fair for certain properties.
You should also research rental rates for similar properties in the same Airbnb market. Looking up the values of nearby properties in the neighborhood can also give you a picture of a fair deal for your property.
Before you invest in any property, make sure you pay for a professional inspection. This process will reveal any significant maintenance or repair needs that could affect the value of the property, ensuring you don’t waste money on a bad investment that requires a lot of repairs. Also, confirm that the given area allows short-term renting.
Coming up with a budget is necessary for an Airbnb investment property. You should take a hard look at your finances and calculate what kind of down payment and mortgage payments you can afford in the future. Skipping this step could get you in over your head once you own the investment property, especially if you have trouble finding tenants early on.
Other important factors to look at when planning your budget include maintenance costs, cleaning services, repairs, utilities, security, HOA fees, insurance costs, furnishing, and decor.
Part of your budgeting plan should involve finding a financing solution for your investment property. Buying Airbnb rentals usually requires extra funding upfront because people do not have that kind of money saved.
To afford the Airbnb property investment, you may need to take out a loan. There are multiple loan options for vacation properties, including DSCR loans, traditional home loans, and home equity lines of credit. Research the options to determine your best path to financing a real estate investment.